AOL and venture firms forming a plan to buy Yahoo!

Web giant AOL and a number of venture capital firms – including Silver Lake Partners and Blackstone Group – have made signals they are interested in teaming up to acquire web portal Yahoo!, it has emerged.

As well as Silver Lake and Blackstone at least two or three other venture capital firms are interested in participating in a formal buyout.

Since CEO Carol Bartz was appointed in 2009 Yahoo! has been under pressure to improve its performance. Bartz too has come under criticism, particularly for her handling of relationships in Asia with e-commerce firm Alibaba Group in which Yahoo! has a 40pc stake as well as the high turnover of Yahoo! senior executives lately.

Citing people familiar with the matter the Wall Street Journal has reported that the discussions are preliminary and don’t even yet involve Yahoo!.

Scenarios for acquisition

AOL has a market capitalisation of US$2.7bn, operating income of US$166.6m and US$391.6m in cash.

Yahoo! on the other hand is worth US$20.6bn and has a net income of US$143m.

Among the scenarios being discussed is a complex deal in which Alibaba Group – which is valued today at US$10bn – would buy back Yahoo!’s 40pc stake and some of Yahoo!’s other assets would be sold off. As a result a much smaller company would be within reach of AOL and venture capital firms.

Another scenario mooted would be a reverse merger after Yahoo! disposes of the Alibaba stake.

A combined Yahoo and AOL would result in an entity that would have the scale to compete with Google. In 2008 Yahoo!’s management at the time bungled a proposed US$45bn acquisition by Microsoft, which ended up walking away from the table.